When Psychology Meets the Budget - Does Obligation Override an Emaciated Piggybank?

With a 10.6 percent state unemployment rate I wonder, “Is it tough to collect in Michigan?”

Without a doubt, the single largest factor holding headlines, affecting households, and impacting recovery efforts – currently and for the foreseeable future – is unemployment. So as the prospects of a deepened recession come ever more present, the final week of January provided us all with a much needed silver lining in the barrage of bad news: “We only lost 71,400 on Monday.” Not a bad start to the New Year!

So with nearly 19.2 million people either out of work or unable to find a full time job, a question continues to loom for those involved in credit creation, collections, and those in the middle: what exactly is the psychological affect of the current economy on debtors and how is it affecting collection efforts?

An intangible, yes, but then again anything dealing with consumer psychology will inevitably be intangible. As gray of an area as psycho-analysis might be, it still seems a pertinent question. If for every one person that loses their job, 10 neighbors, friends, and family members hear about the event and become cautious, what is the toll for the ARM industry?

A quantifiable example of the psychological impact of current economic conditions can be found in the latest consumer confidence index, released this week by the Conference Board. The January consumer confidence index hit an all-time low, 37.7. The number was down from 38.6 in December. Since the Conference Board began tracking the data in 1967, the reading has never been so low.

With unemployment at a fifteen year high and consumer confidence at historic lows, I’d like to hear from our audience their predictions of how this might affect their businesses during the first half of 2009.